UPPA: Competition is good as long as it’s fair

Guest op-eds

February 10, 2013

In reading many of the comments in response to the Jan. 29 economic study commissioned by the Upper Peninsula Petroleum Association, one could conclude that the UPPA does not want any new petroleum retailers, including the Keweenaw Bay Indian Community, to open a station in the Marquette area. That is untrue. We welcome any new competition.

The only issue the UPPA objects to is the tribe's request that the Bureau of Indian Affairs designate the site as trust land, making it exempt from state laws, including sales tax collection.

Exempting the KBIC from gasoline sales tax collections would give the tribe a 20.5 per gallon price advantage over other retailers. Why is our position that one party should not operate outside the confines of the law so objectionable to so many people?

True competition is based upon equal treatment and equal protection under federal and state law. Does anyone really believe it is the role of government to pick winners and losers in the private sector economy?

The KBIC could build a station now if it wanted to. Why is it waiting? I suspect the reason is the tribe will not enter the marketplace without a guaranteed price advantage. If allegations of price gouging are really true, why wouldn't the KBIC want to build a gas station right away and sell gas that is lower in price?

The fact is, if the tribe has done its research, it knows that local retailers are only making a 5 percent gross profit and they cannot offer gasoline less expensively and hope to remain in business. The tribe wants tax-exempt trust land to ensure a huge margin that no other retailer can compete with.

The KBIC also reports in its April 2011 newsletter that it has received "a $600,000 (federal) grant to help fund (the gas station) as long as congress does not take it back." If the government offers assistance, it is only prudent to accept it. However, other petroleum retailers do not have the benefit of receiving a subsidy from taxpayers to operate their businesses.

Some people claim that The Pines has not hurt other retailers in the Baraga/L'Anse marketplace. That is untrue. The study describes how a BP unit closed and the Holiday store in L'Anse had to cut store hours and employee numbers by 25 percent.

A loss of 25 percent of the approximately 250 direct jobs in our Marquette stations equals 62.5 jobs lost. The economic study concluded 63 jobs would be lost. This is not a scare tactic, nor are the results of the study "cockamamie" as commented by others.

Those are real jobs held by hard-working people in the Marquette community.

Some have called for the UPPA to disclose the funds paid for the research and preparation of the study. We engaged the services of professionals and compensated them for their time and expense.

The authors prepared the report by receiving information and data from a number of sources of their choosing. The conclusions drawn and statistics cited are those of the authors and are not influenced by the UPPA. As with any business, we do not disclose our economic arrangements with vendors.

However, we will disclose the cost of the study under one condition: That the KBIC disclose the total amount it received in 2012 from the State of Michigan in rebates for the prepaid gasoline sales tax at The Pines. We doubt the KBIC will do so, as the figure will be huge.

The UPPA respects the KBIC and its right to engage in commerce. The legal strategy the tribe is pursuing is very smart. The KBIC has also done a masterful job of gaining support by marketing this as a solution for non-existent price gouging.

But common sense dictates that any business that operates at a lower cost by not collecting sales taxes is not real competition, and other businesses will suffer.

Any true competition is welcome in the Marquette area. But we should all operate under the same set of rules.

Editor's note: Steven G. Rush is a member of the board of the UPPA and director of government relations for Holiday Companies.